The protein tyrosine phosphatase, SHP2, is widely expressed; however, previous studies demonstrated that hematopoietic cell development more stringently requires Shp2 expression compared to other tissues. Furthermore, somatic gain-of-function SHP2 mutants are commonly found in human myeloid leukemias. Given that pharmacologic inhibitors to SHP2 phosphatase activity are currently in development as putative antileukemic agents, we conducted a series of experiments examining the necessity of SHP2 phosphatase activity for human hematopoiesis. Anti-sense oligonucleotides to human SHP2 coding sequences reduced human cord blood-and human cell line, TF1-derived colony formation. Expression of truncated SHP2 bearing its Src homology 2 (SH2) domains, but lacking the phosphatase domain similarly reduced human cord blood-and TF1-derived colony formation. Mechanistically, expression of truncated SHP2 reduced the interaction between endogenous, fulllength SHP2 with the adapter protein, Grb2. To verify the role of SHP2 phosphatase function in human hematopoietic cell development, human cord blood CD34 + cells were transduced with a leukemia-associated phosphatase gain-of-function SHP2 mutant or with a phosphatase dead SHP2 mutant, which indicated that increased phosphatase function enhanced, while decreased SHP2 phosphatase function reduced, human cord blood-derived colonies. Collectively, these findings indicate that SHP2 phosphatase function regulates human hematopoietic cell development and imply that the phosphatase component of SHP2 may serve as a pharmacologic target in human leukemias bearing increased SHP2 phosphatase activity.